USDA Foods Processing Information

About Processing USDA Foods


Processing of USDA-purchased foods allows eligible Contracting Entities (CEs) participating in the National School Lunch Program (NSLP), such as school districts, to convert raw bulk USDA foods into more convenient, ready-to-use end products. Most entities find they can:


  • Stretch their USDA Food dollars by ordering lower-cost bulk products;
  • Increase food safety by eliminating handling of raw product in school foodservice operations; and
  • Reduce labor costs and cash outlays for food preparation.


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Procurement of USDA Foods  Minimize 

The CEs procure USDA Foods for further processing through these procurement contracting methods:   


  • Small Purchase
  • Competitive Sealed Bids
  • Competitive Negotiation
  • Non-competitive Negotiation


There are restrictions for using each option, including dollar amounts, so please verify all federal, state, and local laws with your purchasing or business department before selecting a method.


CEs can only award the processing of USDA Foods to a company on the TDA approved processor list.  See the Approved Processor section below for more information.

Participation Options  Minimize 
CEs can choose to participate in processing of USDA Foods in one of two ways: either on their own or through participation in a co-operative managed by a lead school or a third party entity such as a private company or educational service center (ESC). Co-ops using a third-party that is not a governmental entity must use the bid or request for proposal (RFP) process to award a contract to a third-party entity.

Passing the Savings On  Minimize 

In an effort to provide low-cost, nutritious meals to millions of Texans, the company (aka processor) is required to return the full value of the USDA Food that is contained in the finished end product. TDA allows contracting entities to use one of the following value pass-through options:

  1. Net off Invoice - discounting the normal commercial price of a product;
  2. Refund - paying a refund to the school, or
  3. Fee for Service - charging a fee for service for converting the USDA Foods.

Managing Inventory Levels  Minimize 
Processors will use either an in-house program or a third-party tracking system to monitor their inventory levels.

Carryover inventory is unused USDA Foods inventory from the previous school year. Federal regulations state that the CE must not carry excess inventory. Click here for more information. 

Co-op and Non Co-op Processing Schools  Minimize 
Click here for a list of co-op schools and non co-op schools. Most schools participate as members of a USDA Foods processing cooperative; however, some CEs large enough to handle a truckload of a single USDA Food and can process without being a  member of a co-op. Examples of activities a purchasing cooperative engages in includes:


  • Food shows or taste testing
  • Selecting or ordering USDA Foods
  • Using USDA Foods for meals
  • Procuring goods and services from commercial enterprises (i.e., to process USDA Foods)

Approved Processors  Minimize 
Once the procurement process is complete, co-op and non co-op processing schools can only divert USDA Foods for further processing to a company that has an approved State Processing Agreement (SPA) with the Texas Department of Agriculture. Click here for a list of approved processors.

In accordance with Federal civil rights law and U.S. Department of Agriculture (USDA) civil rights regulations and policies, the USDA, its Agencies, offices, and employees, and institutions participating in or administering USDA programs are prohibited from discriminating based on race, color, national origin, sex, disability, age, or reprisal or retaliation for prior civil rights activity in any program or activity conducted or funded by USDA.

Persons with disabilities who require alternative means of communication for program information (e.g. Braille, large print, audiotape, American Sign Language, etc.), should contact the Agency (State or local) where they applied for benefits. Individuals who are deaf, hard of hearing or have speech disabilities may contact USDA through the Federal Relay Service at (800) 877-8339. Additionally, program information may be made available in languages other than English.

To file a program complaint of discrimination, complete the USDA Program Discrimination Complaint Form, (AD-3027) found online at: http://www.ascr.usda.gov/complaint_filing_cust.html, and at any USDA office, or write a letter addressed to USDA and provide in the letter all of the information requested in the form. To request a copy of the complaint form, call (866) 632-9992. Submit your completed form or letter to USDA by:

U.S. Department of Agriculture
Office of the Assistant Secretary for Civil Rights
1400 Independence Avenue, SW
Washington, D.C. 20250-9410

This institution is an equal opportunity provider.

© 2018 Texas Department of Agriculture